Premier, Sask. oil industry unfazed by Keystone XL pipeline decision

Saskatchewan Premier Brad Wall is calling the rejection of Keystone XL pipeline disappointing for both the oil industry and for U.S./Canada relations.

The premier was not available for interviews on Friday, but did provide a statement by email. Wall says the rejection of Keystone XL is more about U.S. domestic politics than good environmental policy.

Wall notes that in the last five years, the U.S. has built 66,000 miles of pipeline which is 10 times the equivalent of Keystone XL.

He points out that oil will move with or without pipelines, noting a major increase in the amount of oil shipped by rail in the states.

“The US State Department even agrees that greenhouse gas emissions from rail are much higher than emissions from pipeline,” Wall wrote. “Yet on Keystone XL, the US administration chose to put political interests ahead of the economic and environmental benefits that KXL would provide, and ahead it its relationship with its most important trading partner, Canada.”

Keystone XL was never going to ship Saskatchewan oil, but Wall has stated in the past that it would have cleared transportation backlogs that were costing the province $300 million in revenue.

“This decision makes approval of Energy East even more crucial and it will be one of Saskatchewan’s top priorities as we begin our work with the new federal government,” Wall said.

CJME business analyst Paul Martin maintains we all might be paying for the rejection of Keystone XL, at least in the short term.

“Ultimately, this is a step toward watching the price of oil go up,” Martin said, referring to the decision to reject the pipeline.

“Anytime you can’t move product to market it is going to create shortages,” Martin explained. “And shortages will lead to higher prices.”

Martin adds this could trigger a new beginning as Canada’s oil and gas industry looks to alternatives in technology and transportation.

“Clearly people are going to be thinking about alternates, different ways of doing things, different ways of transporting it, different ways that are cleaner of extracting existing resources.”

The options also include expanding to different markets, which is why recent emphasis can be seen in the Asian markets and the Trans-Pacific Partnership.

A quick phone call to the Saskatchewan oil patch reveals the reaction to the rejection of Keystone XL pipeline is one of disappointment, but not surprise.

“My reaction is it was completely expected and it’s time to move on,” said Del Mondor, who owns Aldon Oils in Weyburn and chairs the Saskatchewan Oil and Gas Show.

Mondor says he wrote off Keystone XL a while ago.

“It was quite clear that the pipeline was not going to go through,” he said.

“The political thoughts were misguided. They’re actually more concerned about the oil sands than they were about the pipeline because the pipeline actually would eliminate trucks and train traffic,” Mondor commented.

In addition to clearing the backlog of oil from Saskatchewan, he says Keystone would have helped resolve the discount on Canadian oil.

“Whether it’s $100 oil or $50 oil, there’s still a discount on Canadian oil, so we’re looking at a difference about $5 a barrel right now,” he said.

In Mondor’s opinion, the key to eliminating that discount is to stop relying on the U.S. to be the single exporter who sets the price for our oil.

“We have to have a made-in-Canada solution, whether that’s Energy East, Northern Gateway Pipeline or even the twinning of Trans-Mountain, those are all made-in-Canada solutions,” he said. “We have to look after our own economy, and each one of those pipelines will get us away from having discounted Canadian oil.”